Suspicious Activity Reports: Terrorism and you
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"I had some hope for the guidelines, but at this point the guidance seems to have made things somewhat worse," says Bartlett of the Financial Services Roundtable. "It's guidance rather than regulation. It may sound small but it's not at all. If they're regulations, you can count on them. File a SAR in this case, but not in this one. But it's merely guidance, and if you fail to file a SAR you can be prosecuted.

"The guidelines tend to be quite broad in terms of risk factors. If you're anywhere in the states of New York, Florida or Minnesota, it's a risk factor. If it has to do with a nonprofit organization or something international, it's a risk factor. So, the Buffalo Symphony Orchestra taking a season ticket order from a Canadian should file a SAR because it's a nonprofit in New York with a subscriber from Canada -- that's three big risk factors, even though there's nothing risky about it."

Richard Riese, director of compliance at the American Bankers' Association, agrees that the revised guidelines could use more revising.

"I still think there are a lot of areas that produce SARs that law enforcement is not very interested in. I think we could be in a better situation with guidance that would allow banks to exclude certain types of filings or give them the comfort of the benefit of the doubt."

One area Riese is talking about is structuring, which is an attempt to dodge reporting requirements by, for example, making several smaller transactions instead of one large transaction, or by making deposits in several institutions instead of one institution. Already, if a transaction involves $10,000 or more in currency, a Currency Transaction Report, or CTR, must be filed based simply on a dollar amount. There's no suspicion on the bank's part that anything illegal is being done. Nevertheless, many customers don't like having their transactions flagged.

"I think a lot of structuring filing, where no one believes there's any underlying money laundering going on, is just people shy about being reported, so they compensate by structuring without realizing that will generate a SAR," Riese says.

"Law enforcement knows that's the case and has no intent on pursuing legitimate activity so nothing is done about them, but we have to file."

A FinCEN regulatory specialist who declined to be identified says rules and requirements are risk-based.

"Every time we come out with a new rule we solicit comments from all affected parties. We seek their input and make reasoned judgments based on the comments we get. It's a careful balancing act. Filings are up but the manual is meant as assistance to examiners and to some extent employees of financial institutions. We think filings are up for a variety of reasons. There are more institutions subject to BSA and greater due diligence post 9/11, and to the fact that these institutions have a new understanding of their obligation."

The specialist points out that new guidance has been issued to banks on how to document not filing a SAR.

"Every institution will have a tipping point -- they're either going to file or they're not going to file. If they decide not to file we encourage them to make a document for their records. The examiner must determine if the bank has its policies and procedures in place and if the bank is doing due diligence appropriately. They need to see that. The examiner may look and say this is strange and then the bank can say we thought so, too, but here's why we decided not to file."